Vornado Realty Proposes Luxury Tower for Hotel Pennylvania Site

Neighborhood leaders want to put a park there. A bidder to rebuild Penn Station wants to move Madison Square Garden there. Now, the owner of the strategically located piece of property says he still has not given up on building a luxury office tower as tall as the Empire State Building at the former Hotel Pennsylvania site at 401 Seventh Ave., between 32nd and 33rd streets

“This is serious business,” the property’s owner, Steven Roth, CEO of Vornado Realty Trust, told investors. Few things set a New Yorker’s imagination soaring like a prime parcel of Midtown property. This piece is particularly prime. Immediately across Seventh Avenue from Penn Station, the busiest transit hub in North America, the site was home for 104 years to the Pennsylvania Hotel, sitting atop the railroad tracks as they continue east from the station toward Long Island and points north.

Vornado has long wanted to build an office tower on the site, as part of its ambition to transform much of the neighborhood around Penn Station into a gleaming office park akin to Hudson Yard, a vision embraced by Andrew Cuomo back when he was governor. But the COVID real estate collapse put a damper on Vornado’s plans. With the market moribund, Vornado went ahead and tore down the Pennsylvania Hotel anyway, leaving an open space and blue sky where what was once the largest hotel in the world had stood.

New York politics abhors a real estate vacuum. So, plans for the site poured forth like commuters emerging from the dismal corridors of Penn Station. Tony Simone, the local Assembly member, proposed the site be converted to a Bryant Park-style green space, as part of a larger reimagining of the Cuomo-era plans for the neighborhood, which was heavily tilted toward office towers.

At the same time, The Grand Penn Community Alliance, a civic group funded by conservative promoters of classical architecture, has offered a plan to move Madison Square Garden to the site and rebuild Penn Station, with a large park facing Eighth Avenue.

Even with New York’s demonstrated ability to build things on top of each other (Exhibit A: Penn Station and Madison Square Garden), it would not be possible to do both of these, even if the owners of the Garden and the Pennsylvania Hotel site agreed.

Now, with New York coming back from the pandemic and the luxury office market booming, Vornado says it has not let go of its original plan for a 1,000-foot-high office tower. Roth told his investor call that his company was in conversations with a possible major tenant for such a tower, which generally speaking is a precursor to actually driving shovels in the ground (or arranging financing for such a multibillion-dollar project).

“This is not just kicking the tires,” Roth explained of the seriousness of the discussions. But he also cautioned that nothing was agreed on and a deal might not come together. Those with other ideas for the site reacted carefully.

“I think this is in line with that they have always been pushing,” said Simone’s spokesperson, Jacob Golden. “Talks with all stakeholders on the Vornado vison and Tony's community vision are ongoing. We are confident all stakeholders want the same thing: a vibrant, safe, 24/7, live-work-lifestyle district. We're going to continue to engage all stakeholders and the governor, pushing for the things this community needs: affordable housing, public open space, public-realm improvements, and safety.”

The Grand Penn Alliance was even more discreet. The Trump administration has issued a request for interest in being the master developer to transform Penn Station.

One of the conditions set in the request is that only Amtrak or the Trump administration speaks to the press about the project. “I am sure you understand,” an official of the alliance said in declining comment.The Pennsylvania Hotel site is covered by a redevelopment called the General Project Plan, or GPP, which replaces local zoning with a state-run process.

Amtrak declined to weigh in on the future of the Hotel Pennsylvania site.

“Until a master developer is selected, it would be premature to speculate,” a spokesman said. “Our priority is to identify private-sector partners who can deliver this project efficiently and cost-effectively—ensuring it stays on schedule, within budget, and minimizes costs for taxpayers.”

Originally, Cuomo proposed that revenue from the construction of 10 new office towers could be skimmed to help pay for the reconstruction of Penn Station. But after the pandemic and the freeze in the real estate market Governor Hochul said she was “decoupling” the funding of Penn Station from the redevelopment of the neighborhood.

The Trump administration has since taken over the rebuilding of the station from the MTA, at which point Hochul withdrew the state funds she had said were available for the project. In the meantime, she has not withdrawn the GPP, although she has said any redevelopment should include more housing and open space than the original plan provided.